Innovation input incentive policy and financialisation of entity enterprises: Evidence from the policy of additional deduction for R&D expenses

Abstract

In the structure of business investment, the tendency of entity enterprises to financialise profoundly affects their incentive to invest in innovation. The question of whether and how innovation investment incentive policies can facilitate firms to adjust their investment capital structure more in favour of R&D innovation deserves attention. This paper empirically examines the impact and mechanism of innovation investment incentive policies on the investment structure of enterprises based on micro-operating data of listed A-share enterprises from 2009 to 2020, taking the R&D expense-plus deduction policy as an example. The study finds that: firstly, the R&D expense-plus-deduction policy significantly promotes firms' investment structure demand for engaging in R&D investment; secondly, its main mechanism comes from the reduced financialisation of entity enterprises, which further increases R&D investment under the incentive of strengthening firms' market capitalisation management capital and the level of risk-taking of firms; thirdly, the policy effect is subject to the effects of firm size, gearing, return on total assets, the nature of firm ownership, management shareholding shares, and firm age. The findings suggest that the innovation investment incentive policy promotes a more biased investment structure of firms towards R&D innovation and achieves the desired objectives of the policy.